Bonds, currencies propel gains in Brazil fund Verde in March

SAO PAULO, April 9 (Reuters) - Verde Asset Management,
Brazil's largest hedge fund with over 30 billion reais ($9.8
billion) under management, posted the highest return in six
months in March as bets on a stronger U.S. dollar and rising
borrowing costs in the country paid off.

In a letter to investors on Thursday, Verde money managers
led by Luis Stuhlberger said that the fund's currency positions
changed with volatility, selling dollars before the Brazilian
real gained while adding more of the U.S. currency as the
real strengthened.

"As we said in our prior letter, the process of asset
pricing is seldom a linear one," the letter said.

Stuhlberger reiterated his view that Brazil's currency will
have to lose further value against the dollar to "be the escape
valve" and accommodate the nation's growing budget and current
account deficits as well as an ongoing economic downturn.
Potential tax increases will only feed into the downturn unless
the government somehow revives the economy's ability to generate
savings and be more productive.

The currency advanced 0.4 percent to 3.0685 reais on
Thursday. It has shed about 13 percent this year.

Verde's defensive approach comes after domestic markets have
underperformed for the past three years as economic policy
decisions weighed on confidence in state-owned companies. Last
year, Brazil's current account gap was the highest in seven
decades, while the government posted the biggest annual budget
deficit since at least 2002.

According to the letter, Verde's so-called currency book
netted a 4.58 percent return last month. Fixed-income
investments gained 0.74 percent as Stuhlberger and his team did
well on bets tied to the trend in local interest rates.